Announcement of Consultative Group for Somalia held on January 23, 1985

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington , D.C. 20433 , U.S.A. BANK NEWS RELEASE Contact: Dunstan Wai January 24, 1985 (202) 477-3294 CONSULTATIVE GROUP FOR SOMALIA SPECIAL MEETING Paris, Wednesday, January 23, 1985 A Special Meeting of the Consultative Group for Somalia was held in Paris on January 23, 1985 to review Somalia's adjustment and reform program for 1985 and to discuss the financing of the balance of payments in 1985. Representatives of 22 countries and institutions met under the Chairmanship of Mr. Michael H. Wiehen, Director, Programs Department, Eastern and Southern Africa Region, World Bank. The Somali delegation was led by His Excellency Dr. Mohamed Sheikh Osman, Minister of Finance, and included His Excellency Abdallah M. Fadil, Minister of Industry, the Governor of the Central Bank, Dr. Omar Ahmed Omar, as well as several senior officials in the Government. Somalia is among the countries classified by the United Nations as least-developed, with a per capita income estimated in 1982 at about $27 0 . While the Government made real progress in 1981-1983 in dealing with the country's economic situation, a set-back occurred in 1984 due in part to the acute shortage of foreign exchange as a result of the fall in livestock exports, and a drop in domestic food production owing to a drought in 1983 and the lateness of rain in early 1984. As the economy deteriorated in 1984, the Government came to realize the need for new adjustment and reform measures, and during the final months of 1984 discussed with the IMF a new program for 1985, for which a IMF standby arrangement has been requested. Participants commended the Government for its program that not only constitutes a stabilization program aimed at reducing imbalances through short-term demand management measures, but also embodies important supply side measures that will have favorable effects on the economy and upon the way it is managed. The stabilization objectives are, inter alia, to reduce  -2- Somalia's overall budgetary deficit, to reduce the overall balance of payments deficit, and to lower the inflation rate from 90 per cent in 1984 to 20 percent in 1985. Participants remarked especially on the establishment of a f ree foreign exchange market for most non- governmental transactions and the liberalization of the economy through the virtual elimination of import and export licensing and restrictions and the dismantling of all price controls. In recognition of Somalia's political courage and economic far- sightedness, donors indicated additional financial support to meet the critical balance of payments requirements of 1985. The support will come from new commodity grants and loans (including food aid) as well as from a reprogramming of project aid to the financing of commodity imports. A subsequent full meeting of the Consultative Group for Somalia is tentatively scheduled for the end of October 1985. These meetings reflect the efforts of the World Bank to take an increasingly comprehensive approach to the financial requirements of its borrowing members. This type of approach was anticipated in the latest World Bank report on sub-Saharan Africa which has received strong endorsement from African Governments as well as from donor countries and institutions. The special meeting was attended by representatives of the Governments of Finland, France, the Federal Republic of Germany, Italy, Japan, United Kingdom, and the United States, and of the African Development Bank, the Arab Fund, the Arab Monetary Fund , the Commission of the European Economic Community, the International Fund for Agricultural Development, the International Monetary Fund, the Islamic Development Bank, the Kuwait Fund, the OPEC Fund, the Saudi Fund, the United Nations Development Programme, the World Bank and the World Food Programme. The Government of Canada and the Development Assistance Committee of the Organization for Economic Cooperation and Development were represented as observers . -0-